Monthly, quarterly and annual Closes and Discloses are an integral part of the business cycle. When you have a great month, quarter or year you want to share the great news, describe the success and give credit to your team for a job well done. When things don’t go well you need to explain why and, more importantly, detail the preventative actions being taken to return to success.
In many organizations the close to disclose cycle can be up to 25 business days. Why? What causes delays? Delays have many sources – interminable hours of Variance Analysis, changing management assumptions, waiting for data, endless reviews and approvals, etc.
As a result of these delays critical information is not available when needed and the quality of that information is suspect. A scramble ensues to interpret results and disclose uncertain guidance. Credibility could be compromised.
Process quality is “multiplicative.” Said differently, the true measure of your close to disclose process quality is to multiply the quality of each successive step in the overall process. This is called “Rolled Throughput Yield” or RTY. In our experience we have seen RTY for Finance processes frequently less than 40%! The impact of poor close to disclose process quality can be:
- Delays in providing crucial information to leadership and investors
- Terrible quality of life for your finance team due to frequent 80 hour weeks and constant scrutiny from auditors, leading to poor morale and greater than 50% turnover in many companies
- Uncertain guidance can have a negative impact on shareholder returns
There is a light at the end of the tunnel. Operational excellence processes are available for us to implement that can eliminate delays and dramatically improve the Financial Close to Disclose process quality, often improving current RTY by 50%.
By focusing on standardizing processes and eliminating waste, Financial professionals can enhance greatly enhance the business value of the Close to Disclose cycle and significantly improve credibility in the marketplace.
Look for our next blog, Financial Close to Disclose: The “One Day Close” and more information about optimizing your financial processes and our webinars at www.leanhorizons.com.
